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What’s the 2018 federal budget impact on property?

According to Economist Dr. Andrew Wilson, the 2017 Federal Budget could be described as "The Housing Market Budget" and the 2018 Federal Budget was much the same.

In handing down the budget in May, the Government didn't directly reference housing issues such as supply, instead focusing their attention on major infrastructure development across Australia. Dr. Wilson agreed and shared his views on the impact of infrastructure spending in the 2018 Federal Budget and what this means for interest rates. A summary of Dr. Wilson's findings from his 15-minute insight video is detailed below.

There weren't any specific policy initiatives designed to focus on the housing market as was the case in the 2017 Federal Budget. In this year's Federal Budget, the Government announced a $75 billion investment in transport infrastructure over the next 10 years. This will improve accessibility across Australia.

From the $75 billion investment in transport infrastructure, $24.5 billion will be dedicated to new major transport projects and incentives. These projects and incentives will be paid for with a combination of grant funding, loans and equity investments.

In his video, Dr. Wilson noted that infrastructure projects announced in the budget are long-term transport projects that can provide better connectivity. For the housing market, however, these projects won't have a substantial impact in the short to medium term.

In the long-term, however, the impacts of infrastructure spending can drive growth in the property market. The increased livability that occurs when infrastructure projects are completed and operational naturally increases demand in well-connected areas resulting in capital growth.

Dr. Wilson believes the 2018 Federal Budget will have more of a direct positive impact in the housing market than last year's budget. Based on the economic indicators in this year's Budget, one of the key drivers of housing demand will be migration, particularly in Sydney and Melbourne. Maintaining the near-record levels of migration growth in Australia will be one of the key factors in ensuring the Government can maintain its forecasts.

As migration to Australia continues to grow, supply-side initiatives, that often take a long time to implement, will be vital to meet the ever-increasing demand for housing across Australia's capital cities.

Overall, analysts and economists considered this year's budget to be rather subdued given the next Australian federal election will occur on or before 18 May 2019 (half- Senate) and on or before 2 November 2019 (House of Representatives).



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